SECRETARY OF STATE FOR WORK AND PENSIONS V. PAYNE AND COOPER [2010] EWCA Civ 1431

Denis Edwards acted as junior counsel for the Secretary of State for Work and Pensions in the appeal from the judgment of Mr. Justice Cranston in July.  The Court of Appeal decided by a majority to dismiss the Secretary of State's appeal.

These are test cases brought by two claimants who challenge the lawfulness of deductions made by the Secretary of State under ss.71 and 78 of the Social Security Administration Act 1992 in order to recover overpayments of social security benefits and Social Fund loans.  The Claimants argued and the Court of Appeal has decided that, once a person obtains a debt relief order (DRO)  under part 7A of the Insolvency Act 1986 specifying a social security debt as a debt covered by the DRO, the Secretary of State has no power to recover an overpayment of benefit or Social Fund loan paid to the debtor.

This decision has significant consequences not only for DWP but also for local authorities and the system of housing benefit.  The law on recovery of overpayment of housing benefit is in the same terms as s.71 of the 1992 Act.  The financial implications of the decision are not yet known and enforcement of the decision is stayed pending any decision of the Supreme Court.